The Exchange is designed to help more small businesses offer workplace retirement plans to more employees, and to help employees save for retirement at higher rates. To help plan participants better prepare for retirement, the Exchange will automatically enroll eligible workers at a 6% contribution rate with a 2% automatic increase in each of the next two years. The hope is that employees who are saving at least 10% annually for retirement will experience dramatically improved retirement outcomes. A Roth provision will also be made available to participants, so that they can choose to save before or after tax.
“We intend for the Retirement Plan Exchange to result in more retirement plan coverage for more small-business workers,” said Jim Kais, vice president and national practice leader for special markets at Transamerica Retirement Solutions.
According to Kais, the Exchange is likely to appeal to small businesses that don’t currently offer a retirement plan, allowing more employees to be covered by retirement plans. It is also designed to appeal to small businesses that want to outsource plan administration and fiduciary tasks in order to remain focused on their company’s growth.
The Exchange will offer small businesses cost efficiencies along with the protections and convenience of fiduciary and administrative support. According to Kais, the advantages to participating include:
- Cost-Efficiency – Participating employers can enjoy cost advantages through asset pooling and fee reductions as plan assets increase. They can also save on audit fees, document preparation and filing fees.
- Comprehensive Professional Fiduciary Platform - A small business can also mitigate its fiduciary responsibilities because the Exchange will assume certain fiduciary duties on behalf of the participating employer. Plan sponsors will benefit from the professional services of an independent 3(38) investment fiduciary who selects and monitors the plan’s investment lineup. An independent, named, non-investment 3(21) fiduciary will have discretion over the disposition of plan assets, plan operations, appointment of other fiduciaries, and hiring/firing of service providers.
- Administrative Ease - The Exchange also provides administrative relief to employers by outsourcing all plan administrative duties. This is typically available only for large retirement plans. The Exchange offers an independent 3(16) plan administrator, who takes responsibility for a host of day-to-day plan duties and for hiring a third party administrator (TPA). The TPA will take responsibility for plan compliance and testing, and can also consult with small businesses on the many, flexible plan design provisions that the Exchange offers employers.
For more information, call 800-401-5826, and select option 1.